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General Electric CEO says third-quarter results are 'completely unacceptable'

  • New General Electric CEO John Flannery says third-quarter earnings results were "completely unacceptable."
  • Flannery was speaking to investors on a conference call.
  • GE reported third-quarter earnings that were barely half of what Wall Street expected.
John Flannery, chief executive officer of GE.
Leanne Miller | CNBC
John Flannery, chief executive officer of GE.

General Electric reported third-quarter earnings that were barely half of what Wall Street expected, and its new CEO did not shy away from the miss.

"The results I'm about to share with you are completely unacceptable," CEO John Flannery said on a conference call with investors Friday, where he telegraphed that big changes were ahead.

"We are focusing heavily on the culture of the company," Flannery said. "Things will not stay the same at GE."

The company is in the process of finalizing its 2018 financial outlook and says it will unveil those projections and any changes to its dividend in November. As part of that process, the company is reviewing sources of cash in this year and next.

In the third quarter, GE's cash flow from operating activities fell 78 percent from a year ago, to $4.1 billion.

Flannery said every aspect of the large, traditionally bureaucratic company will be scrutinized, from what businesses it owns and invests in to the processes it uses to make decisions to its management practices.

"Everything is on the table and there are no sacred cows," Flannery said.

GE's strong dividend is a top concern for investors, and Flannery made no promises, saying there are "moving pieces" to consider.

"The dividend is a priority in our capital allocation framework and we understand its importance to our investor base," said Flannery, who replaced Jeff Immelt as CEO in August.

The company's current annual dividend gives a yield of 4.1 percent, the second-highest among Dow companies behind Verizon Communications.

Extensive cost cutting is also ahead, with the company now seeking to slice $2 billion in costs next year, up from a prior target of $1 billion.

Flannery's comments appeared to resonate well with investors. Although the stock was down as much as 8 percent prior to the conference call, shares recouped losses and were down more than 2 percent in active trading.

After stripping out restructuring charges, GE earned 29 cents per share from continuing operations in the third quarter, down 9 percent from the period a year earlier. Analysts surveyed by Thomson Reuters expected the company to earn 49 cents per share.

The earnings miss reported by GE was the company's biggest in at least the last 17 years, according to Bespoke Investment Group. Prior to Friday's report, the company's biggest miss relative to Wall Street expectations was just 7 cents in April 2008, according to Bespoke's Paul Hickey.